Suppose that for a particular economy and period, investment was equal to 100, government expenditure was equal to 75, net taxes were fixed at 100, and consumption (C) was given by the consumption function: C=25 + 0.8YD where YD is disposable income and Y is GDP.
a) What is the level of equilibrium income (Y)? SHOW ALL STEPS.
b) What is the value of the government expenditure multiplier and the tax multiplier? SHOW ALL STEPS.